Long-Term Disability Coverage Increases In 2012

By Cyril Tuohy

InsuranceNewsNet

The number of employees covered under long-term disability (LTD) insurance rose by 1 percent to 32.3 million last year, reversing decreases that had dominated the industry since 2008, according to the latest report from the Council for Disability Awareness (CDA).

“The decline in claims and growth in covered workers are both likely related to the gradually improving economy and declining unemployment rates,” Barry Lundquist, CDA president , said in a news release. “While the environment seems ripe for an upswing, recovering claimants looking to return to work continue to be hampered by limited availability of appropriate employment opportunities.”

Employees covered by long-term disability (LTD) insurance had decreased steadily from more than 34 million in 2008 to less than 32 million in 2011, CDA said.

The decline in employee coverage mirrored the drop in the number of companies offering long-term disability insurance. Nearly 216,000 employers offered LTD coverage in 2008, but fewer than 208,000 did so last year as companies filed for bankruptcy, merged with healthier competitors or simply eliminated long-term disability coverage as a cost-cutting measure.

The number of employers offering group long-term disability coverage last year remained nearly even with 2011, according to the 2013 CDA Long Term Disability Claims Review, which summarizes claim data from the nation’s top disability insurance companies.

Many workers overlook group long-term disability insurance, also known as income protection insurance, despite the fact that it is relatively cheap. Typical coverage pays 60 percent of an employee’s income.

Disability claims payments reached $9.4 billion in 2012, a 0.4 percent increase over the previous year, the report also found.

In addition, 27 percent of reporting companies said long-term disability claim incidences had increased in 2012, down from 43 percent of companies reporting an increase in 2011, and 56 percent of companies reporting the same in 2010.

Most companies expect the claims trend to improve, but are divided over whether the industry will ever get back to the lower claims frequency that dominated the industry before the recession, the report found.

While nearly 30 percent of new long-term disability claims are connected to musculoskeletal systems and connective tissue, the steepest rise in new long-term disability claims in 2012 came from pregnancy and childbirth, the survey found.</p>

Last year, pregnancy and childbirth caused 12.3 percent of new long-term disability claims for female wage earners, compared to 9.6 percent in 2011, the survey also found.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.